Europe at the edge

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“Margin Call,” ABX, and Timberwolf

So far, the crisis of 2007-2009 has inspired several films. One was the outstanding documentary Inside Job, which is unique for focusing on the culpability of academic economists. Another was Oliver Stone’s Wall Street: Money Never Sleeps, a sytlized but flawed retelling of the collapse of Bear Stearns and Lehman Brothers. Back in May, there was the HBO movie Too Big to Fail, which purported to tell the story of the TARP bailout.

Now there is Margin Call. It does not tell the story of what happened in 2008, when big firms failed and governments used taxpayer money to bail them out. Rather, it tells the story of 2007. That was when some of the savvier players, particularly Goldman Sachs, discovered that the assumptions governing their risk models for U.S. mortgages needed to be revised.

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What are bond prices saying about future inflation?

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Are stocks a good hedge against inflation?


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A good capitalist ought to be an environmentalist

The Earth is humanity’s endowment. We mismanage it at our peril. Read more of this post

How should you think about passive investing?

It is exciting to speculate on the markets. Betting on the future level of UK interest rates, the price of nickel, or the exchange value of the Vietnamese dong versus the Thai baht requires skill, insight, and luck. Consistently making money in the markets requires incredible discipline, intelligence, and time. That is why most of us will never make a living just by investing.

But we still invest all the time, even if it is just a decision whether to leave money in a savings account or stock up on canned food. Most people also have 401k (or 403b) accounts and IRA accounts. Despite the enormous sums of money people put away for retirement, they spend very little time thinking about the best way to do it.

Luckily for you, I used to help some of the world’s biggest and most sophisticated investors with this problem. Read more of this post

What are stock and bond prices predicting for growth?

In today’s confusing markets, many people are wondering whether stocks are cheap or dear, just as they wonder whether bonds represent great value or a massive bubble. The first question everyone needs to answer before making a trade is: what is already implied in the market price? My purchase of Sony stock was particularly ill-timed because I had yet to understand this concept.

Tonight I will look at what the relative yields on stocks and bonds tell us about the market’s expectations for real profit growth. If you have a strong opinion on the future profitability of American public companies, you can use this metric to help determine whether you should buy or sell shares. Read more of this post